Fair Value Measurements

9 Months Ended

Oct. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table presents the fair value hierarchy for the Company’s assets and liabilities measured at fair value on a recurring basis as of October 31, 2024 (in thousands):

	Level 1		Level 2		Total
Assets:
Cash equivalents:
Money market funds	$	1,479,438	$	—	$	1,479,438
U.S. government securities	—		154,090		154,090
Time deposits	—		109,513		109,513
Commercial paper	—		27,072		27,072
Corporate notes and bonds	—		14,884		14,884
Short-term investments:
Corporate notes and bonds	—		1,097,552		1,097,552
U.S. government and agency securities	—		388,779		388,779
Commercial paper	—		341,943		341,943
Certificates of deposit	—		179,788		179,788
Long-term investments:
Corporate notes and bonds	—		673,640		673,640
U.S. government and agency securities	—		219,137		219,137
Derivative assets:
Foreign currency forward contracts	—		2,028		2,028
Total assets	$	1,479,438	$	3,208,426	$	4,687,864
Liabilities:
Derivative liabilities:
Foreign currency forward contracts	$	—	$	(1,408)	$	(1,408)
Total liabilities	$	—	$	(1,408)	$	(1,408)

The following table presents the fair value hierarchy for the Company’s assets and liabilities measured at fair value on a recurring basis as of January 31, 2024 (in thousands):

	Level 1		Level 2		Total
Assets:
Cash equivalents:
U.S. government securities	$	—	$	742,234	$	742,234
Money market funds	533,211		—		533,211
Time deposits	—		56,263		56,263
Short-term investments:
Corporate notes and bonds	—		939,727		939,727
U.S. government and agency securities	—		573,780		573,780
Commercial paper	—		353,548		353,548
Certificates of deposit	—		216,444		216,444
Long-term investments:
Corporate notes and bonds	—		607,989		607,989
U.S. government and agency securities	—		299,637		299,637
Certificates of deposit	—		8,681		8,681
Derivative assets:
Foreign currency forward contracts	—		60		60
Total assets	$	533,211	$	3,798,363	$	4,331,574
Liabilities:
Derivative liabilities:
Foreign currency forward contracts	$	—	$	(745)	$	(745)
Total liabilities	$	—	$	(745)	$	(745)

The Company determines the fair value of its security holdings based on pricing from the Company’s service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

See Note 10, “Convertible Senior Notes” for the fair value measurement of the Company’s convertible senior notes, which is not included in the tables above.

Strategic Investments

The tables above do not include the Company’s strategic investments, which consist primarily of (i) non-marketable equity securities recorded at cost minus impairment, if any, and adjusted for observable transactions for the same or similar investments of the same issuer (referred to as the Measurement Alternative), and (ii) marketable equity securities.

The Company’s non-marketable equity securities accounted for using the Measurement Alternative are recorded at fair value on a non-recurring basis and classified within Level 3 of the fair value hierarchy because significant unobservable inputs or data in an inactive market are used in estimating their fair value. The estimation of fair value for these assets requires the use of an observable transaction price or other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. The Company’s marketable equity securities are recorded at fair value on a recurring basis and classified within Level 1 of the fair value hierarchy because they are valued using the quoted market price.

The following table presents the Company’s strategic investments by type (in thousands):

	October 31, 2024		January 31, 2024
Equity securities:
Non-marketable equity securities under Measurement Alternative	$	280,589	$	190,238
Non-marketable equity securities under equity method	5,372		5,307
Marketable equity securities	9,465		37,320
Debt securities:
Non-marketable debt securities	750		1,500
Total strategic investments—included in other assets	$	296,176	$	234,365

The following table summarizes the gains and losses associated with the Company’s strategic investments in equity securities (in thousands):

	Three Months Ended October 31,				Nine Months Ended October 31,
	2024		2023		2024		2023
Unrealized losses on non-marketable equity securities under Measurement Alternative:
Impairments	$	(5,200)	$	(1,000)	$	(11,578)	$	(3,101)
Net unrealized gains (losses) on marketable equity securities	(3,791)		(790)		(6,796)		4,206
Net unrealized gains (losses) on strategic investments in equity securities	(8,991)		(1,790)		(18,374)		1,105
Net realized gains (losses) on equity securities sold(1)	380		—		(17,440)		—
Total—included in other income (expense), net	$	(8,611)	$	(1,790)	$	(35,814)	$	1,105

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(1)Represents the difference between the sale proceeds and the carrying value of the securities at the beginning of the period or the purchase date, if later.

The cumulative upward adjustments and the cumulative impairments to the carrying value of the non-marketable equity securities accounted for using the Measurement Alternative held by the Company as of October 31, 2024 were $18.3 million and $33.9 million, respectively.